Santa Barbara County supervisors agreed to spend $500,000 annually to join a joint powers agency of counties with large numbers of adult cannabis industry operators as a way to collect more taxes and assure compliance with county codes.
The board voted 4-1, with 5th District Supervisor Steve Lavagnino dissenting, to join the California Cannabis Authority that consists of San Luis Obispo, Monterey, Humboldt, Mendocino, Yolo, Inyo and Lassen counties.
In addition, the Sept. 14 vote directed staff to come back with a presentation on how the cannabis taxation process is carried out in the county, which Lavagnino said he wanted during a separate discussion on the fourth-quarter cannabis status report.
Brittany Heaton, the county’s principal analyst for cannabis, said currently the county doesn’t have access to data it needs to assist with compliance and enforcement but currently has no way of obtaining.
“We really see the CCA as an opportunity to get data that is usable,” Heaton told supervisors. “It’s really about transparency, visibility and the analytics.”
Heaton said NCS Analytics was contracted through the Cannabis Authority to analyze data from the member counties and provide such information as whether a cultivator may be underreporting the value of his sales and what the trends are in other areas.
She said she talked to someone involved in cannabis regulation in San Luis Obispo County about what the Cannabis Authority can provide.
“The person in SLO said, ‘They’re nerds. They’re cannabis nerds, and they’ll tell you anything. They'll answer all your questions,’” Heaton said.
But Lavagnino was skeptical about the value of the information the county will be getting for its money.
“I don’t know if $500,000 is going to get us what we want,” he said.
Lavagnino asked why the county staff couldn’t come up with the same information, because they have the expertise and the technical resources to do such analyses.
County Executive Officer Mona Miyasato said currently her office and the Tax Collector’s Office “lack visibility into the industry,” and the data provided through the Cannabis Authority will allow the county to validate what’s being reported.
Jeff Frapwell, assistant county executive officer, said data the county currently receives are one to four months old, so they’re not very valuable in projecting tax revenues.
But the data from the Cannabis Authority will be “real-time” information that can raise red flags when an operator’s receipts are compared to what’s happening nationally and in other cannabis-growing areas, he said.
Lavagnino also said he didn’t like the idea of giving other counties trade secrets about what’s happening in Santa Barbara County.
“One of the other problems I have with this is sharing information with our competitors,” Lavagnino said. “The reality is, in the world of cannabis, Monterey [County] is our competitor.”
Greg Turner, executive director and counsel for the Cannabis Authority, said the data that are shared do not contain proprietary information and consist more of analyses of such things as market prices, yields per acre and so forth.
However, Lavagnino still had concerns over the price.
“I’m struggling, I’m really struggling, obviously, to find the value in a half a million dollars — let’s think about that, a half a million dollars a year — to tell us what? We’re leaders in the cannabis industry. We’re coming in as the top dog. We’re coming in as the big, the big fish. I feel like the benefit is for everybody else, and I don’t really see it for us.”
Staff members said the $500,000 annual dues, which are based on revenues, were actually negotiated down from the price initially quoted by the Cannabis Authority.
Second District Supervisor Gregg Hart apparently was concerned about potential increases in dues but noted membership isn’t permanent.
“We don’t know if the deal we cut today is the deal we’ll have a year from now,” he said. “If it ends up being worth it, we’ll continue. If it isn’t, we won’t.”
First District Supervisor Das Williams supported joining the organization.
“I think too much time has passed when we have not had certainty that people are doing what they’re supposed to be doing,” Williams said. “I don’t view legal operations in Monterey [County] as our competitors. I view the black market as our competitor.”
Third District Supervisor Joan Hartmann also supported it, pointing out the state has fallen short in providing track-and-trace information, and joining the Cannabis Authority would provide “a check on ourselves: ‘What are we missing?’”
Chairman and 4th District Supervisor Bob Nelson said the county decided to use gross receipts as the basis for taxing cannabis and, as such, the system will need “more eyes on it.”
“Tax avoidance is an American trait, [but] it is a crime,” he said.